Ring v R W & C D Investments Pty Ltd

3747/04 - LESLEY ANNE RING v R W & C D INVESTMENTS PTY LTD & ANOR JUDGMENT

The parties and their dispute 1 The plaintiff became the lessee of two adjoining parcels of land at Ewingsdale near Byron Bay by leases granted in June 1999. The lessor under one lease was the first defendant, R W & C D Investments Pty Ltd, a company of which Mr R W Holmes and his wife are the directors. The lessor under the other lease was their daughter, Ms R G Holmes, who is the second defendant. The plaintiff commenced to carry on a nursery business on the combined property, having acquired that business from the first defendant on 30 June 1999, the day on which the term of each lease commenced. The term was, in each case, five years with an expressed "termination date" of 29 June 2004. 2 Each lease contained a provision conferring an option for the lessee to renew. The present proceedings arise from steps taken by the plaintiff to exercise the option to renew under each lease. The principal claims by the plaintiff in her summons filed on 1 July 2004 are claims for declarations that the plaintiff has validly exercised the options. Mr C M Harris of counsel, who appeared for the plaintiff, and Mr J B Turnbull of counsel, who appeared for the defendants, agreed that the issues to be determined are: (a) whether notices purporting to exercise the respective options were given in accordance with the applicable provisions of the leases; and (b) if so, whether the defendants had taken steps under s.133E and related provisions of the Conveyancing Act 1919 sufficient to enable them to rely on breaches of the lease covenants by the plaintiff as a ground justifying refusal to renew the leases; and (c) if not, whether discretionary considerations warrant refusal to the declarations the plaintiff seeks. Relevant provisions of the leases 3 The provisions of the two leases are, in all material respects, identical. In addressing the first of the agreed issues, it is necessary to refer at once to clause 27.1 of each lease: "27.1 If the Lessee shall desire to take a renewed lease of the demised premises ('the First Option') for a further term of five (5) years from the expiration of the term of this lease and shall give to the Lessor not less than three (3) months' previous notice in writing thereof and shall during the term of this lease duly and punctually pay the rent reserved by this lease at the time hereinbefore appointed for payment thereof and shall duly observe and perform the covenants and agreements by and on the part of the Lessee expressed or implied in this lease up to the expiration of the term hereof the Lessor shall at the cost and expense of the Lessee lease to the Lessee the demised premises at the rent hereinafter referred to for such further term and subject to the same covenants and agreements and provisions as are herein contained except: 27.1.1 In any renewed lease the review dates for the purpose of Clause 26 shall be the same day in each year of the renewed term as is referred to in Clause 26 hereof. 27.1.2 Notwithstanding sub-clause 27.1, the rent payable by the Lessee to the Lessor at the commencement of each option period shall be the current market rent and the rent payable for each subsequent year shall be reviewed by the Index Number the provision for the calculation of which is hereinafter provided." 4 Other subclauses of clause 27 (including provisions for determining "current market rent") follow but need not be mentioned. 5 Clause 24 of each lease reads: " 24. Service of Notices Any notice or request hereunder may be served in a manner mentioned in Section 170 of the Conveyancing Act, 1919 or in Section 200 of The Corporations Law." Evidence relevant to giving of notice of exercise of option 6 It is common ground that, in light of clause 27.1 of each lease, the option to renew was not validly exercised unless "notice in writing" in terms of that clause was "given" on or before Monday 29 March 2004, that being the latest day that was "not less than three (3) months" before the end of the term, the expressed "termination date" being 29 June 2004. 7 The evidence concerning steps taken by the plaintiff to exercise the option to renew under each lease is sparse. Two notices, each signed by the plaintiff and dated 24 March 2004, are in evidence. One is entitled "Notice of Exercise of Option to R W & C D Investments Pty Ltd" and the other is entitled in like manner by reference to the second defendant. Each is headed, "Lease by you to me - Property: 50 Plantation Drive Ewingsdale". Subject to one possible reservation as to the terms of the notice to the second defendant (and the description of the relevant property), each contains words sufficient to signify the lessee's desire to take a renewed lease for a further five years, that being the matter that must be communicated to satisfy clause 27.1. Accompanying each notice is a letter on the letterhead of the plaintiff's solicitors addressed to the relevant defendant and dated 25 March 2004. Each letter reads: "We enclose by way of service Notice of Exercise of Option dated 24 March 2004."

Each such letter was addressed to a street address, as distinct from a post office box, and there is no suggestion that either address was inapplicable or incorrect. There is no evidence from anyone within the solicitors' office as to despatch of the letters dated 25 March 2004. 8 Mr R W Holmes, a director of the first defendant, states in his second affidavit: "… I was served with the Notice of Exercise of Option by post."

He goes on to say that he was away in Glen Innes between Sunday 28 March 2004 and Saturday 3 April 2004 and that he did not receive the notice until 3 April 2004 when he returned to his home at Ballina. Implicit in what he says is that delivery of the posted letter occurred before 3 April 2004. It is not disputed by the first defendant that delivery to and receipt by Mr Holmes amounted to delivery to and receipt by it. 9 The second defendant says in her affidavit: "… I was served with the Notice of Exercise of Option by post."

She says that she cannot remember the exact date of receipt but knows that it was sometime in the week commencing Monday 28 March 2004. She says that she knows this because whenever she receives a document related to the property she gives it immediately to her father. He was away between Sunday 29 March 2004 and Saturday 3 April 2004. Had she received the notice on Friday 26 March 2004, she would have given it to her father before he went away. Implicit in what the second defendant says is that delivery of the posted letter occurred at the earliest on Monday 29 March 2004 and at the latest on Friday 2 April 2004. In saying this, I accept, without evidence, that Australia Post does not make deliveries to street addresses on Saturday or Sunday. Findings in relation to giving of notice 10 The evidence justifies an inference that each "Notice of Exercise of Option" signed by the plaintiff was sent to the relevant defendant by post and was delivered to and received by that defendant. I also infer that each notice, although dated 24 March 2004, was sent with the solicitors' relevant covering letter dated 25 March 2004 and that the date of posting was Thursday 25 March 2004 or a later date. 11 The evidence I have mentioned does not enable me to make any finding as to the date of delivery or receipt of each postal article beyond a finding that delivery by post occurred, in each case, on a day in the period Monday 29 March 2004 to Friday 2 April 2004. It was submitted on behalf of the plaintiff that I should infer that delivery occurred, in each case, within the time mentioned in clause 27.1, that is, not later than Monday 29 March 2004. Such an inference is, in Mr Harris's submission, supportable by reference to the fact that, when the defendants' solicitors wrote to the plaintiff's solicitors on 12 May 2004 (which appears to be the first occasion on which reference was made to the exercise notices in the solicitors' correspondence), the defendants' solicitors made no explicit reference to the notices not having been given within the required time. The letter began: "We refer to your letter dated 25/3/04 and to the purposed Notices to [sic] Exercise of Option attached thereto and are instructed to dispute the form of the Notices and deny the validity of and entitlement to the issue of the notices. We are instructed to advise that your client has not complied with Clause 27 of the Lease and accordingly is not entitled to seek an option to renew the Lease and our clients shall not give a renewed Lease to your client and they further rely on the numerous breaches by your client of the collateral Leases as follows …" 12 I decline to draw the inference Mr Harris suggests. There is, at the start of the second paragraph of this letter, a clear assertion on behalf of the defendants that the plaintiff did not comply with clause 27. That assertion is all-embracing, so far as the issue of non-compliance is concerned, and, while the defendants did not say explicitly that the condition as to timing was not satisfied, the words used encompass that and thereby counter any suggestion that the letter implicitly accepts that the timing requirement was met. 13 This being so, the first of the agreed issues mentioned at paragraph [2] above is to be addressed by referenced to the existence of the notices dated 24 March 2004 and the covering letters of 25 March 2004, the inference that the letters and accompanying notices were posted on or after Thursday 25 March 2004 and the acknowledgment by the respective addressees that each postal article was delivered on a day not capable of precise identification but falling within the period Monday 29 March 2004 to Friday 2 April 2004. Determining the date on which the notices were given 14 The event upon which clause 27.1 is predicated is the giving of notice in writing. The operative verb is "give". It refers to "notice in writing". The event will be shown to have occurred only if a document containing the matter of which notice is to be given can be seen to have been put into the actual or constructive possession of the lessor. There is an onus upon the lessee to communicate by written means. The sufficiency of particular steps to constitute the giving of notice in writing is not in issue in this case. Each defendant admits that it or she received written notice as a result of delivery through the post. The only issue is as to the time at which (or day on which) notice in writing was given. 15 Clause 24 of each lease prescribes a way in which any "notice or request hereunder" may be "served". Clause 27.1 does not contemplate or require that a notice of exercise of option will be "served". Such a notice of exercise is, however, obviously a "notice or request hereunder". It is also a notice in written form. Clause 24 should therefore be regarded as identifying ways in which a clause 27.1 document may be transmitted so as to come to the attention of the lessor. In other words, the concept of service reflected in clause 24 should, in relation to notices in writing, be regarded as the same as the concept of giving in clause 27.1. In the case of a written notice, there can, as Plowman J observed in In re 88 Berkeley Road NW9 [1971] 1 Ch 648, "be no difference between 'serving' the notice and 'giving' the notice". 16 Clause 24 does not prescribe the manner of giving notices in any exclusive or compulsory way. It is facultative only ("… may be served") and leaves open any other method by which notice in writing may be given by one person to another. In this respect, the provision differs from those considered in cases such as Lolly Pops (Harbourside) Pty Ltd v Werncog Pty Ltd (1998) 9 BPR 16,361 and FAI General Insurance Co Ltd v Parras (2002) 55 NSWLR 498. 17 The other point to make about clause 24 is that it makes available alternatives, being "a manner mentioned in Section 170 of the Conveyancing Act 1919" and "a manner mentioned … in Section 220 of The [sic] Corporations Law". The second of these may be disposed of briefly as being irrelevant to this case where, on the evidence, the mode of communication chosen by the plaintiff was post. Under s.220 of the Corporations Law, as it stood until 1 July 1998 (when it was repealed by the Company Law Review Act 1998 (Cth)), the only method of service of a document upon a company involving use of the post was "by sending it by post to, the registered office of the company". In the absence of any evidence as to the location of the registered office of the first defendant, the plaintiff cannot rely on this former provision of the Corporations Law, via clause 24 of her lease from the first defendant. Even if it is correct to regard that lease entered into in June 1999 as referring to s.220 of the Corporations Law, it refers to a form of the section that no longer existed at the time. In June 1999, s.220 dealt with an entirely different subject matter. Any possibility based on s.220 of the Corporations Law must be disregarded. 18 There remain two other approaches to determining the question of the time at which the notices sent with the posted letters of 25 March 2004 should be found to have been given. The first centres on s.170 of the Conveyancing Act referred to in clause 24 of each lease. The other is that the notices should be regarded as having been despatched without regard for, and without any intention to adopt, a mode of service referred to in clause 24. I shall consider these possibilities in reverse order. Fixing the time without regard to clause 24 19 If each posted notice is viewed as having been despatched by post in a way that pays no attention to clause 24, a decision as to the day on which the notice was given falls to be made by reference to the evidence, viewed in the light of the rules of evidence. The evidence leaves no doubt that each posted notice reached its destination on a day in the period Monday 29 March 2004 to Friday 2 April 2004. The evidence does not permit any more precise determination of the date of delivery. 20 Mr Turnbull submits that, in these circumstances, it is necessary to have regard to s.160 of the Evidence Act 1995: "160 Postal articles (1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.

(2) This section does not apply if: (a) the proceeding relates to a contract, and (b) all the parties to the proceeding are parties to the contract, and (c) subsection (1) is inconsistent with a term of the contract.

(3) In this section: working day means a day that is not: (a) a Saturday or a Sunday, or (b) a public holiday or a bank holiday in the place to which the postal article was addressed." 21 As a provision of the Evidence Act, s.160 applies, by virtue of s.1(1) of that Act, to "all proceedings in a New South Wales court" (an expression defined in such a way as to include this court). Section 160 therefore lays down a rule of evidence applicable to these proceedings and creates a presumption as to the time of receipt of a "postal article" (which includes a letter sent by Australia Post) "unless evidence sufficient to raise doubt about the presumption is adduced". Unless thus displaced, the s.160 presumption must lead to a finding that the two notices of exercise of option were received on the fourth "working day" after posting. I shall come back to this. 22 Section 160(2) does not apply in this case. Section 160(1) is not inconsistent with any term of the leases since they contain no provision about the time at which a posted article is to be regarded as received. Fixing the time with the aid of s.170 of the Conveyancing Act 23 The alternative approach involves s.170 of the Conveyancing Act 1919: " 170 Regulations respecting notices (1) Any notice required or authorised by this Act to be served shall be in writing, and shall be sufficiently served: (a) if delivered personally, (b) if left at or sent by post to the last known residential or business address in or out of New South Wales of the person to be served, (b1) in the case of a mortgagor in possession or a lessee, if left at or sent by post to any occupied house or building comprised in the mortgage or lease, (b2) in the case of a mining lease, if left at or sent by post to the office of the mine, (c) if delivered to the facilities of a document exchange of which the person on whom it is to be served is a member, or (d) in such manner as the Court may direct. (1A) In the case of service by delivery to the facilities of a document exchange, the notice is, unless the contrary is proved, to be taken to have been served on the second business day following the day of delivery of the notice to those facilities. (2) Any notice required or authorised by this Act to be served on a lessee or mortgagor shall, if served otherwise than by post, be sufficient although addressed to the lessee or mortgagor by that designation only, without the name of the lessee or mortgagor, or generally to the persons interested, without any name, and notwithstanding that any person to be affected by the notice is absent, under disability, unborn, or unascertained. (2A) The provisions of this section extend to notices required to be served by any instrument affecting property (including any dealing under the Real Property Act 1900 ) executed, made or coming into operation after the commencement of the Conveyancing (Amendment) Act 1930 , unless a contrary intention appears in the instrument or dealing or in the Real Property Act 1900 . (3) This section does not apply to notices served in proceedings in any court. (4) This section applies only if and so far as a contrary intention is not expressed in any instrument, and shall have effect subject to the provisions of such instrument. (5) In this section, business day means any day except Saturday or Sunday or a day that is a public or bank holiday throughout the State." 24 Clause 24 of each lease allows (but does not compel) resort to "a manner mentioned in Section 170 of the Conveyancing Act 1919". Where, as here, post is used and the case is not within the special provisions of ss.170(1)(b1) and 170(1)(b2), resort to "a manner mentioned in Section 170 of the Conveyancing Act 1919" will necessarily be to the manner stated in s.170(1)(b). There is no suggestion that the address on each of the plaintiff's solicitor's letters of 25 March 2004 was not the relevant lessor's "last known residential or business address" as referred to in s.170(1)(b). 25 While s.170 contains rules for determining the time of service in a case where there is delivery to a document exchange (see s.170(1A)), there is no like provision applicable to other modes of service. In Wallville Pty Ltd v Liristis Holdings Pty Ltd (2001) 10 BPR 19,089, Bryson J took the view that, in a case of sending by post within s.170(1)(b), no statutory rule assists in ascertaining the time at which service is to be regarded as effected. His Honour said (at [34] and [35]): "Section 170 was amended and its terms largely recast by the Real Property and Conveyancing (Amendment) Act 1991, so that at present it contains no provision dealing with a time at which service is deemed to take place when service is effected by post. By contrast, when service is effected by document exchange the same amendment which repealed the deeming provision in relation to service by post inserted a deeming provision in relation to service by document exchange. See subs.1(A). Clearly there was no legislative intention to make any provision, expressly or by implication, establishing a time at which delivery by post is deemed to have taken place. It appears even more clearly in the present form of s.170 than it did earlier that the operation of the section in relation to the post is to authorise service by post and make service by post sufficient, but not to create any artificial presumption that notice was given or is to be deemed to have been given when it has not in fact been given. Where s.170 is expressly incorporated as it is in this sub-lease, service of notice by post is an authorised means of service, but service is not effective unless a written notice is actually given to the lessor, and unless that event happens within the time required by clause 15.

The provisions of s.170 simply have no impact on finding when service of notice takes place if the notice is served by post in the manner provided for. Reliance could be placed on the ordinary course of Australia Post business to raise a probability and base a finding about when delivery took place; but in this case there was no such evidence. Reliance could also be placed on the Court's taking notice of the ordinary course of Australia Post business; the Court may be able to do this where the time allowed wide margins, but it is not possible for me to know or take notice of the ordinary course of delivery of a document posted at Cronulla Post Office for delivery at a street address in Taren Point but with the wrong post code on the envelope. That could well take more than six days; I do not know, and the question is academic because it is reliably established elsewhere in the evidence that the document was not delivered at all." 26 In the Wallville case, Bryson J did not mention (and was apparently not referred to) the possible effect of s.76 of the Interpretation Act 1987: " 76 Service by post (1) If an Act or instrument authorises or requires any document to be served by post (whether the word "serve", "give" or "send" or any other word is used), service of the document: (a) may be effected by properly addressing, prepaying and posting a letter containing the document, and (b) in Australia or in an external Territory - is, unless evidence sufficient to raise doubt is adduced to the contrary, taken to have been effected on the fourth working day after the letter was posted, and (c) in another place - is, unless evidence sufficient to raise doubt is adduced to the contrary, taken to have been effected at the time when the letter would have been delivered in the ordinary course of post. (2) In this section: working day means a day that is not: (a) a Saturday or Sunday, or (b) a public holiday or a bank holiday in the place to which the letter was addressed." 27 In Vescio v Westpac Banking Corporation [2003] NSWSC 1270, Bryson J observed that all s.170(1)(b) requires, in a posting case, is posting itself. His Honour said (at [45]): "On the whole I incline to the view that what s 170 requires is posting, not actual notice, and that when s 170 applies because it is made to apply by other legislation (and not by some contractual arrangement of parties) compliance by posting is sufficient, whether or not there is a successful outcome and the notice is actually delivered. I do not think, however, that I can express a concluded view on this and on the facts that I have found a concluded view is not required."

Bryson J also said (at [46]): "I was also referred to s 76 of the Interpretation Act 1987 which in my understanding creates a mechanism which a party attempting to prove service can avail himself of but does not make a general prescription regulating matters which are already regulated by s 170. In particular I see no implication from the terms of subs 76 (1) (b) that if evidence sufficient to raise doubt is adduced the document should be taken not to have been effected at all; to my mind the better reading is that para (b) deals only with establishing the day on which service is to be taken to have been effected." 28 As Bryson J observed in Walville, s.170 of the Conveyancing Act was "largely recast" by an amending Act of 1991. At that time, s.76 of the Interpretation Act was in the following form:

" Service by post If an Act or instrument authorises or requires any document to be served by post (whether the word 'serve', 'give' or 'send' or any other word is used), service of the document - (a) may be effected by properly addressing, prepaying and posting a letter containing the document; and (b) shall, until the contrary is proved, be taken to have been effected at the time when the letter would have been delivered in the ordinary course of post." 29 The re-casting of s.170 of the Conveyancing Act in 1991 may be assumed to have been undertaken on the footing that, because it was a provision authorising the service of notices and, in s.170(1)(b), authorised service by post, its meaning and operation were affected and complemented by the provisions of s.76 of the Interpretation Act as they stood in 1991. Those provisions dealt with the question of when a document served by post is deemed served in the absence of proof to the contrary. The re-cast s.170 therefore fitted with the then existing scheme of s.76 in such a way that there was no need for s.170 itself to deal with that question. It is that circumstance, in my view, that explains the absence from s.170 of any specification about the time when service by post is to be taken to occur, even though there is a specification of that kind with respect to service through a document exchange (a subject not touched upon by the Interpretation Act). And s.170, having been re-cast against the background of the then existing s.76, should, in my view, be regarded as now affected and complemented by the current version of s.76. 30 It follows that, in a case such as the present, where s.170 is made applicable by a contractual provision and (in contradistinction to the cases before Bryson J) there is no dispute about the fact that a notice was sent by post (or, indeed, delivered and received), the question of the time at which service of the posted notice is to be taken to have occurred is a question that must be answered by reference to s.76. This is because, as I have said, the provisions of s.76 affect the meaning and operation of the particular statutory provision the parties have chosen to adopt. 31 I therefore do not accept that the aspect of s.170 concerned with service by post equates service with posting. That view leaves no room for the operation of s.76. Decision on first issue 32 If the evidence actually adduced does not identify the precise day on which the posted notices of exercise were received or served, s.160 of the Evidence Act or s.76 of the Interpretation Act supplies the date. Under the approach that pays no attention to the methods specified in clause 24, it is the Evidence Act provision that is relevant. Under the clause 24 approach involving adoption of the manner of service in s.170 of the Conveyancing Act, the gap is filled by the Interpretation Act. In each case, the section causes the relevant date to be the fourth "working day" after posting. The definition of "working day" is virtually the same in each statute. 33 The evidence does not enable me to find the precise day of receipt or service of either notice of exercise. For reasons discussed at paragraph [12] above, I do not accept that lack of specific complaint of lateness warrants a conclusion that notice was given within time. Posting must be regarded as having occurred, at the earliest, on the date of each covering letter (25 March 2004). That was a Thursday. The fourth "working day" thereafter was Wednesday 31 March 2004. It is that day that each statutory provision causes to be regarded as the date of receipt or service, assuming posting on 25 March 2004. If posting occurred on a day later than 25 March 2004, the deemed date of receipt or service will be correspondingly later than 31 March 2004. 34 It follows that neither notice of exercise can be regarded as having been given within the time required by clause 27.1 of the leases (that is, not later than 29 March 2004) and, for that reason, the first of the issues at paragraph [2] must be determined adversely to the plaintiff. 35 The plaintiff did not seek to argue that any form of relief against forfeiture is available to overcome the failure to exercise the option before its expiry: Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 122; Walville Pty Ltd v Liristis Holdings Pty Ltd (above). Disposition 36 Because the first of the agreed issues has been determined adversely to the plaintiff, there is no occasion for the others to be addressed. Nor is it necessary to consider the possible reservation about the description of the relevant property in the notice addressed to the second defendant. 37 The summons must be dismissed with costs. **********

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